Inventory shrinkage—the loss of products between the point of manufacture and the point of sale—is often written off as the cost of doing business. It gets chalked up to damaged goods, clerical errors, or minor external theft.
However, when shrinkage numbers quietly tick upward, the root cause might be a fundamental flaw in your ERP access controls within the warehouse.
The Fox Guarding the Henhouse
Consider the role of a Warehouse Manager. They need extensive access to the ERP system to do their job efficiently: receiving goods, transferring stock, and conducting cycle counts.
But a critical control failure occurs when this same individual is granted the authority to process inventory write-offs or adjustments without independent approval.
How the Scheme Works
If a single employee controls the physical stock and the digital accounting of that stock, they have a free pass to commit and conceal theft.
- The employee physically removes high-value inventory from the warehouse.
- To hide the theft, they log into the ERP and process an inventory adjustment, labeling the stolen items as “damaged,” “expired,” or “lost in transit.”
- The digital books balance with the physical reality, and the audit trail looks like routine operational waste.
Securing the Supply Chain
To prevent this, organizations must enforce a strict Segregation of Duties (SoD) between physical custody and financial authorization.
- The Rule: The person handling the stock cannot be the person adjusting the ledgers. Write-offs must be pushed into a workflow requiring approval from a controller or finance manager.
- The Solution: Because warehouse roles often suffer from “access creep” as employees cover for one another, manual reviews fail. Implementing automated SoD monitoring ensures that anyone with physical stock management roles is instantly flagged if they are granted write-off capabilities in systems like Infor LN.
Don’t let poor system security turn your warehouse into a black hole. Separate the duties, automate your monitoring, and protect your physical assets.